Securities Industry Commentator by Bill Singer Esq

[F]acebook violated an administrative order issued by the FTC in 2012 by misleading users about the extent to which third-party application developers could access users' personal information. The complaint further alleges that Facebook violated the Federal Trade Commission Act by deceiving users about their use of this and additional sensitive information.

As reflected in the stipulated order filed with the complaint, Facebook has agreed to settle these allegations by paying a $5 billion civil penalty and implementing robust, new compliance measures that will change how Facebook prioritizes and approaches user privacy issues. These new compliance measures include appointment of an independent assessor to monitor Facebook's conduct, privacy reviews for all new or modified Facebook products, establishment of a new Independent Privacy Committee on Facebook's Board of Directors, annual compliance certifications by Facebook CEO Mark Zuckerberg, and various reporting and record-keeping requirements. Under the stipulated order, the Department of Justice and FTC will share responsibility for monitoring and enforcing Facebook's compliance.

[I]n  2014 and 2015, the now-defunct advertising and data analytics company, Cambridge Analytica, paid an academic researcher, through a company he controlled, to collect and transfer data from Facebook to create personality scores for approximately 30 million Americans.  In addition to the personality scores, the researcher, in violation of Facebook's policies, also transferred to Cambridge Analytica the underlying Facebook user data, including names, genders, locations, birthdays, and "page likes."  Cambridge Analytica used this information in connection with its political advertising activities. 

The SEC's complaint alleges that Facebook discovered the misuse of its users' information in 2015, but did not correct its existing disclosure for more than two years.  Instead, Facebook continued to tell investors that "our users' data may be improperly accessed, used or disclosed." (emphasis added)  According to the SEC complaint, Facebook reinforced this false impression when it told news reporters who were investigating Cambridge Analytica's use of Facebook user data that it had discovered no evidence of wrongdoing.  When the company finally did disclose the incident in March 2018, its stock price dropped.

The complaint further alleges that during this two-year period, Facebook had no specific policies or procedures in place to assess the results of their investigation for the purposes of making accurate disclosures in Facebook's public filings.

Green maintained a business that operated a website called "Destination Bitcoin."  Through the Destination Bitcoin website, Green received money from members of the public (the "customers"), deposited such money into bank accounts maintained by Green, and then converted such money into Bitcoin in accordance with the customers' instructions.  Green charged the customers a fee for this service.

Federal law provides that any person who owns or controls a money transmitting business shall register the business (whether or not the business is licensed as a money transmitting business in any State) with the Secretary of the Treasury.  However, Green did not register, either in his own name or in the name of his business, with the Secretary of the United States Treasury as a money transmitting business.

[F]rom at least December 2016 through April 2018, Smith operated a fraudulent scheme that raised nearly $2.5 million from over fifty investors. To entice investors, Smith allegedly falsely told them that he was a real estate wholesaler who used investor funds for earnest money to purchase and then quickly resell properties. Smith also allegedly promised investors returns of up to 100%. The SEC's complaint alleges, however, that Smith never purchased the purported properties. Instead, Smith allegedly used new investor funds to pay returns to earlier investors in a classic Ponzi scheme fashion and to pay his personal expenses, including his rent and trips to Hawaii. To conceal his fraudulent scheme, Smith also created false real estate contracts with forged property owner's signatures.

• Securities Industry Commentator
• Bill Singer